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Is The US Preparing To Blame The Next Market Crash On "Russian Spies"?

As reported yesterday, in a surprise announcement late in the day, and shortly before the S&P downgraded Russia to junk (perhaps as part of the fine-print of its $1.5 settlement with the DOJ for daring to downgrade the US in 2011), the US Department of Justice announced it had busted a Russian spy ring in New York City, where at least one of the three people was said to be involved with finance and potentially, capital markets.

Specifically, the DOJ announced "charges against Evgeny Buryakov, aka “Zhenya,” Igor Sporyshev and Victor Podobnyy in connection with Buryakov’s service as a covert intelligence agent on behalf of the Russian Federation (Russia) in New York City, without notifying the U.S. Attorney General of Buryakov’s status as an agent of Russia, as required by federal law. Buryakov was placed under arrest earlier today in Bronx, New York, and is scheduled to appear before U.S. Magistrate Judge Sarah Netburn in federal court in Manhattan later today. Sporyshev and Podobnyy no longer reside in the United States and have not been arrested. By virtue of their prior positions in the United States on behalf of Russia, both of them were protected by diplomatic immunity from arrest and prosecution while in the United States."

On the surface this sounds like your plain vanilla diplomatic escalation, in which a lowly spy, or rather alleged spy, is exposed to show the displeasure of the host regime toward the opposing country, an action which will surely result, within 24-48 hours, in a comparable arrest of a US spy in Russia.

And yet, reading through the complaint we were dumbfounded when we encountered the following exchange:

On or about May 21, 2013, IGOR SPORYSHEV, the defendant, called EVGENY BURYAKOV, a/k/a "Zhenya," the defendant, to ask for BURYAKOV's help in formulating questions to be used for intelligence-gathering purposes by others associated with a leading Russian state-owned news organization (the "News Organization").

From my training and experience, I know that the News Organization has been publicly identified by former SVR agents as an organization that is sometimes used by Russian intelligence to gain access to and gather intelligence under the cover of the news media.

During the May 21, 2013 telephone call between EVGENY BURYAKOV, a/k/a "Zhenya," and IGOR SPORYSHEV, the defendants, which was intercepted by the FBI, the following exchange occurred:

EVGENY BURYAKOV ("EB"): Hello?

IS: Hello Evgeny.

EB: Hey.

IS: Can you talk? . . I need help.

EB: Aha.

IS: [The News Organization] wants very much, I don't know how it came down from the top, but they need three questions with regard to the New York Exchange. What would be interesting to us. Can you help write something?

EB: It's a difficult question. . I need to think.

IS: Can you think of something in fifteen minutes?

EB: Fifteen minutes?

IS: Yes.

EB: I'll try. . . . Should I call you?

IS: Yes, call me.

EB: If you will not pass by me?

IS: No, I will not.

* * *

Approximately 20 minutes later, IGOR SPORYSHEV, the defendant, called EVGENY BURYAKOV, a/k/a "Zhenya,"the defendant, and the following conversation, which was intercepted by the FBI, occurred:

EB: Well, I thought about it. I don' t know whether it will work for you but you can ask about ETF. . . . E-T-F. E, exchange.

IS: Yes, got it.

EB: How they are used, the mechanisms of use for destabilization of the markets.

IS: Mechanism - of - use - for - market - stabilization in modern conditions.

EB: For destabilization.

IS: Aha.

EB: Then you can ask them what they think about limiting the use of trading robots. . . . You can also ask about the potential interest of the participants of the exchange to the products tied to the Russian Federation.

* * * Based on my training, experience, and participation in this investigation, I believe that, in this conversation, IGOR SPORYSHEV, the defendant, asked for, and obtained from, EVGENY BURYAKOV, a/k/a "Zhenya," the defendant,questions of interest to the Russian economic intelligence community that were to be used by others associated with the News Organization. SPORYSHEV began the conversation by asking for help ("I need help") . SPORYSHEV said that a request came down from leadership, which I believe to be a reference to the SVR leadership, to pass three questions regarding the New York Stock Exchange to the News Organization ("[The News Organization] wants very much . . . it came down from the top, but they need three questions with regard to the New York Exchange")

In a notable departure from every other intercepted conversation involving these two men, IGOR SPORYSHEV, the defendant, made it clear in this call that the two men did not have time to meet in person to discuss this intelligence assignment. Rather, SPORYSHEV asked EVGENY BURYAKOV, a/k/a "Zhenya," the defendant, to get back to him within "fifteen minutes" ("Can you think of something in fifteen minutes?"). BURYAKOV then suggested he would call SPORYSHEV back but only if SPORYSHEV was unable to meet in person (IS: "Yes, call me."; EB: "If you will not pass by me?") . I believe that this time pressure is the reason that this particular intelligence assignment was relayed over a telephone line rather than in person.

IGOR SPORYSHEV, the defendant, then called EVGENY BURYAKOV, a/k/a "Zhenya," the defendant, back to supply a particular line of questioning for use by the News Organization. Specifically, BURYAKOV said the News Organization could ask about how the New York Stock Exchange ("NYSE") used exchange-traded funds or "ETF"; potential limits on the use of high-frequency, automated trading systems ("trading robots") ; and the potential interest among NYSE members to products tied to Russia ("products tied to the Russian Federation").

Based on my training and experience, and my familiarity with this investigation, I believe that neither defendant' s cover position - banker (EVGENY BURYAKOV, a/k/a "Zhenya," the defendant) and a Trade Office representative (IGOR SPORYSHEV, the defendant) - involves providing assistance to Russian journalists. Nor do their covers explain why the two men would be engaging in a discussion about crafting questions that "would be interesting to us" and that the News Organization representatives should put to New York Stock Exchange employees.

Absurdity of the entire exchange aside, because when one "spy" ask another "spy" whether he "can ask about ETF. . . . E-T-F. E, exchange... How they are used, the mechanisms of use for destabilization of the markets" to which the other replies with "Mechanism - of - use - for - market - stabilization in modern conditions" and is promptly corrected "For destabilization" and when the first one further inquires about "what they think about limiting the use of trading robots", it simply reeks of a scripted conversation.

Worse, when the supposed originator of this line of inquiry is none other than the modern KGB i.e., the Foreign Intelligence Service, i.e. the SVR, because as the FBI special agent on the case says "SPORYSHEV said that a request came down from leadership, which I believe to be a reference to the SVR leadership, to pass three questions regarding the New York Stock Exchange to the News Organization", one has to wonder if the Russian KGB couldn't just open a blog - say this one - or even read a book - say that of Michael Lewis' - to understand all they need to know about just how "robots" and "E-T-Fs" destabilize markets. No, they had to use a network of spies to get to the bottom of just how rigged the market is.

So we will leave aside questions of just what this supposed spy bust is supposed to achieve, with the FBI having now exposed a ground-level apparatchik, who clearly knows nothing and needs pointers on "trading robots", and ending the FBI's ability to trail his activities in the future as well as to potentially get to his superiors - which is always the main prerogative in spy cases such as this one - one thing has become abundantly clear: the scapegoating plan for the "blame game" once the next, devastating, market crash takes place, will be simple: first, blame the E-T-Fs and the "trading robots" for the destabilization (but not the central banks, never the central banks), and then, just to kill all birds with one stone: blame it on the Russian spies.

Sadly, yes: bad B-grade movie scripts from the 80's is just how one would describe the current administration (complete lack of) imagination and foresight. Then again, what else can one expect when none other than the president relied on the "stupidity of the American voter" to pass his career-defining "Affordable" Care Act?

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